HUL: Rural Recovery Stuttering, Premium Products Drive Growth
Urban Markets Lead FMCG Growth: FMCG giant Hindustan Unilever Limited (HUL) reported a profit decline for Q4, but remains optimistic about the sector's future. Growth is currently fueled by urban markets, modern trade (e.g., supermarkets), e-commerce, and HUL's premium product portfolio.
Rural Recovery on the Horizon: While urban areas dominate growth, rural demand is slowly recovering quarter-on-quarter for the past year. A normal monsoon and improving economic conditions are expected to further accelerate this trend. However, rural markets haven't yet surpassed urban ones.
Price Sensitivity Remains: Although demand is improving, HUL expects low single-digit negative price growth in the near term if commodity prices stabilize. The company is focusing on competitive volume-led growth through brand investment and strategic planning.
Market Share Rebound: After a period of decline due to pricing adjustments, HUL is regaining market share in detergent bars and basic skin cleansing products. This trend is likely due to smaller competitors exiting the market during inflation and returning during deflationary periods. Overall, despite some slight erosion, HUL has maintained its market share advantage over the past two years.
Digital Focus for Advertising: HUL is shifting advertising focus to digital media, particularly targeted social media and influencer marketing, while reducing reliance on traditional television advertising. A&P (Advertising & Promotion) spending rose 2% YoY in Q1, with a 60% increase in digital spending.
Overall: HUL acknowledges the challenges in rural markets but sees positive signs of recovery. They are confident about future growth driven by a focus on urban areas, e-commerce, premium products, and strategic advertising investments.